That time Obama negotiated his own Carrier-style deal

A plant critical to a major industry in a Midwestern state was facing a financial crisis, forcing it to make a drastic business decision that would cost nearly 1,000 blue-collar workers their jobs. The president and his staff, alerted to the potential crisis, swooped in. Working tirelessly behind the scenes, they negotiated a multimillion-dollar package of state tax breaks, saving the plant—and the jobs.

It sounds like Carrier, the deal that President-elect Donald Trump just negotiated to save 700 factory jobs in Indiana, and which has critics up in arms that he’ll use his power in the White House to selectively pick winners and losers. But no: The plant was a Pennsylvania oil refinery, the president was Barack Obama, and the agreement happened in 2012.

Though little-remembered now, Obama's deal was surprisingly similar to what Trump just did: direct federal intervention to save U.S. jobs. The refinery deal actually included more in state tax breaks than Trump’s deal did, $25 million compared to Carrier's $7 million.

If that doesn't sound familiar, it's because there were key differences as well. Obama staffers worked quietly behind the scenes; they never publicly promised to save the refinery and didn’t promote the effort after it succeeded, nervous about setting a precedent for helping out a politically connected and economically important firm—despite the fact that Pennsylvania was a battleground state in the 2012 election.

“When you are sitting in the West Wing of the White House, anything you do for one state or one company or one individual, you have to think about it in the context of whether you’d be willing to do it for others who are similarly situated,” said a former senior Obama administration official.

Taken together, the two agreements provide a window into a dramatic change facing Washington in how the White House handles the business community. Presidents have always engaged with the private sector, at times working closely with individual companies when necessary, and Obama was no different. But the Obama White House largely did not intervene in individual business decisions—and worked carefully with lawyers to steer around ethics problems when it did. Trump’s style appears to be a drastic break from that approach, a strategy marked by a willingness to use the power of the bully pulpit to meddle in the decision-making of individual companies and loudly declare victory. It’s a sea change for big business, whose leaders must now include in their calculations whether a specific business move could provoke an outraged tweet from the president-elect.

“It’s like night and day,” said Fred Bergsten, a senior fellow and former director of the Peterson Institute for International Economics, of the Trump approach.

The Obama administration first became involved in the Pennsylvania refinery not because 850 jobs were at risk but because it worried gas prices, at the time around $3.50 per gallon, would rise if the refinery closed. That refinery, which was owned by Sunoco, was the oldest and largest on the East Coast, capable of processing 335,000 barrels of oil per day, about equal to 25 percent of the East Coast capacity. In fact, two other refineries in the area were also slated to be closed, further increasing pressure on gas prices. (One, owned by ConocoPhillips, would be bought by Delta, and a second Sunoco refinery would close.) Together, the three refineries processed 50 percent of the East Coast capacity, according to a report released by the Energy Information Agency in February 2012. The agency warned of a potential “spike” in gas prices if all three refineries closed.

Aides in the White House monitored gas prices closely throughout the year and became involved in preventing the closure of the large Sunoco refinery after Rep. Bob Brady (D-Pa.) reached out to the White House for help finding a solution. Gene Sperling, then the head of the National Economic Council, took the lead on the project, convening calls with officials from Sunoco and the Department of Energy, along with Brady, state officials and leaders from the United Steelworkers union. The head of Sunoco eventually said the company would keep the plant open if it could enter into a joint venture with another private-sector company. And there was such a company that had interest in the refinery: the Carlyle Group, the well-connected private equity firm in Washington.

Sperling and his staff continued to help coordinate among many of the interested parties. It was a difficult process, he said, as lawyers from the Office of theWhite House Counsel had to be on almost every call to make clear that any concessions being made to save the refinery were appropriate and would be available to any current or potential buyer, and not just Carlyle.

Under the eventual agreement, Carlyle took control of about two-thirds of the refinery, paying nothing for the stake but agreeing to pay for upgrades at the facility. The state government chipped in up to $25 million in tax credits, and the Environmental Protection Agency agreed to alter a previous consent decree between Sunoco and the agency to allow the joint venture to avoid costly environmental reviews during the upgrades. The new firm, which was called Philadelphia Energy Solutions, was set to go public in 2015 before low oil prices forced the cancellation of the IPO. Like many refineries, the drop in the price of oil has taken a toll on Philadelphia Energy Solutions, which was forced to cancel capital improvement projects.

Carlyle declined to comment on the deal for this story. Sunoco directed inquiries to Philadelphia Energy Solutions, which did not respond to a request for comment.

The deal, which was announced on July 2, 2012, was a big victory for the Obama administration, saving 850 jobs in a key battleground state and preventing a rise in the price of oil. But the White House didn’t trumpet the deal. The news received scant media attention; an in-depth look at the deal did appear in the Washington Post—but not until December, after the presidential election.

Obama staffers discussed whether to promote the deal but decided there was little upside in doing so. Dan Pfeiffer, then the White House’s communication director, could not recall the exact conversations but said the press would not have covered the deal in a positive manner. “850 jobs would have been laughed out of town as a drop in the bucket,” he wrote in an email, given that the unemployment rate hovered around 8 percent. He added, “I think it’s bad if you are in office and it looks like you are using that office to win an election.” One other complication for Obama: At the time, he was railing against Mitt Romney for his private equity ties. Promoting a deal with Carlyle could have undermined those attacks or led to charges of hypocrisy.

Trump could not have handled the Carrier deal more differently. The president-elect railed against Carrier during the primary and general election, using it as an example of a company that was betraying America and promising to save the jobs at the plant if elected. Obama staffers, on the other hand, purposefully never made any promises about the jobs at the Sunoco refinery, not wanting to get the workers’ hopes up or risk a political backlash if the plant closed despite their efforts.

While Trump tweeted on Thanksgiving that he was “working hard” to keep the plant open and “MAKING PROGRESS,” the Obama White House kept the talks with Sunoco and Carlyle quiet, worried that if word got out, it could set a precedent for other companies to seek out similar agreements. And, of course, once the agreements were struck, Obama and Trump reacted differently. Trump took to Twitter to brag about the Carrier deal and visited the plant in a highly visible trip, whereas Obama didn’t mention the Carlyle deal.

Why the Carrier deal has been such a PR success for Trump speaks not only to his skills as a messenger but to his way of conducting business. On a broader scale, the deal was tiny. Less than 1,000 jobs were saved in an economy of more than 150 million workers. But it was very tangible and easy to understand: Trump promised to save the plant from closing, negotiated an agreement and saved hundreds of jobs. Critics decried the deal as crony capitalism and pointed out that the company is still shipping 1,300 jobs to Mexico.

Obama handled interactions with the business community very differently. The refinery deal aside, he tended to work with companies on a broader scale, efforts that had a larger economic impact but were less visible to everyday workers. That includes large items like the automaker bailout and the stimulus, and narrower ones like manufacturing hubs and pledges from companies to be good corporate citizens. The benefits of these moves, at times, were hidden, even to the beneficiaries themselves. One oft-cited example is Elkhart, Indiana which received $170 million from the stimulus, saving many jobs, yet voted overwhelmingly for Trump this year.

Obama, of course, implemented many policies opposed by the business community as well, including financial regulations under Dodd-Frank, a plethora of measures targeting federal contractors and recent rules looking to crack down on inversions, the controversial corporate tactic where companies avoid U.S. taxes by moving their official jurisdiction of residence to a low-tax country. Yet even in these cases, former staffers said Obama rarely, if ever, targeted individual companies. “He was always very careful not to single out firms. He would talk about companies that were inverting without naming names,” said Jared Bernstein, a former top economic adviser to Vice President Joe Biden. “There was a sense that that was intervention on a level that was picking winners and losers, one that was inconsistent with their view of industrial policy.”

In private, Obama veterans vent frustrations that Trump has received such widespread praise for the Carrier deal while Obama’s efforts to revive manufacturing have gone comparatively unnoticed. (While manufacturing employment is down overall during Obama’s presidency, it’s risen by about a million since its nadir in 2010.) Josh Earnest, the White House press secretary, said at a briefing last week that if Trump can complete Carrier-esque deals “804 more times, then he will meet the record of manufacturing jobs that were created in the United States while President Obama was in office.”

Trump confidants argue that the Carrier deal was less an example of Trump’s economic strategy and more a signal to Americans that the president-elect intends to fight for their jobs. His real agenda for encouraging U.S. companies to stay in the United States will come through tax and regulatory reform, two priorities that Trump specifically mentioned in his speech at the Carrier plant.

“You’re not going to be able to save the American economy one business at a time,” said Stephen Moore, an economist at the Heritage Foundation and informal adviser to Trump. “Obviously, you have to get the policies right.”

Not everyone agrees that Trump’s tactics represent a major break from the Obama White House. Former Rep. Tom Davis argued that while the president-elect’s actions are much more visible, administrations typically cajole companies, sometimes using controversial methods, behind the scenes. “We panic at this, but it’s really not out of the ordinary,” he said. “He does it in a less orthodox way because he’s doing it through tweets. Other guys would have their hatchet guys in departments deliver the message.”

Will Trump continue to publicly target individual companies once he’s sworn in? That remains to be seen, and a Trump spokeswoman did not respond to a request for comment. But so far, he has shown no signs of changing his ways. On Friday, just a day after his trip to the Carrier plant, Trump took to twitter to lash out at his next target, an Indiana-based company named Rexnord that intends to move 300 jobs overseas. And on Tuesday, he had found yet another target: Boeing’s Air Force One contract.

“Boeing is doing a little bit of a number,” he said. “We want Boeing to make a lot of money, but not that much money.”